20 May 2013

Vatukoula Gold Mines plc.

("Vatukoula", "VGM" or "the Company")

Strategic Investment

Vatukoula Gold Mines plc. is pleased to announce that it has entered into a subscription agreement with SCD Energy Inc., ("Subscriber"), which is an indirectly wholly owned subsidiary of DRK Energy Co., Limited ("DRK") whereby the Subscriber has subscribed for 30,000,000 new ordinary shares in the Company at a price of £0.15 per share (the "Subscription Shares") to raise £4.5 million (the "Subscription Agreement"). The Subscription Shares will represent approximately 19.2% of the enlarged issued share capital of the Company.

The Subscription Agreement will be completed over the next 30 days in two equal tranches of 15,000,000 (£2.25 million). The first tranche will be completed by the 28 May 2013 and the second by the 17 June 2013.

In addition, under the Subscription Agreement, the Company and DRK have agreed to work in conjunction to source the required debt financing to fund the Company's planned expansion programme. Should VGM enter into a debt financing package facilitated or introduced by DRK of no less than US$40 million within 120 days of the Subscription Agreement ("Debt Financing") DRK will have the option to acquire an additional 24,000,000 new ordinary shares in the Company (the "Option") at an exercise price of £0.15 per share.

If, however the Company secures the Debt Financing within the 120 days from institutions that it is currently in discussions with, the Option exercise price will be the lower of £0.25 or 90% of the five day trading volume weighted average price ("VWAP") following the announcement of the Debt Financing. These terms will also apply if no debt financing is secured within the 120 days, in which case the VWAP will be based on the 5 trading days after the expiry of the 120 day period. The issue of shares under the option would be subject to approval at a general meeting which will be convened once the Company has more certainty on the nature and timing of the Debt Financing.

If exercised, the Option would represent approximately 13.3% of the enlarged issued share capital of the Company and in aggregate with Subscription Shares DRK, the Subscriber would hold approximately 29.9% of the enlarged issued share capital of the Company.

In conjunction with the Subscription Agreement, the Company has agreed that the Subscriber will be entitled to nominate 2 directors for appointment to the board on completion of the first tranche of the Subscription Agreement. Their appointment will be subject only to approval by relevant regulatory authorities. Initially both of these directors will hold non-executive positions on the board. However, once a suitably qualified candidate has been identified, one of the Subscriber's nominee non-executive directors will resign and this candidate will be appointed as an executive director and Chief Operating Officer.

The funds raised from the Subscription Agreement will be used for working capital purposes while VGM works to secure the Debt Financing.

The Subscriber is indirectly wholly owned by DRK. DRK is a comprehensive oilfield service group. DRK has secured multiple patents for its own proprietary technology and products. DRK is engaged in engineering construction, technology service, chemical engineering and oilfield development. It has businesses in Africa, South America, Middle East and Middle Asia. DRK has its registered office at MBJ2846, RM1007, 10/F., Ho King Center, No. 2-16 Fa Yuen Street, Mongkok, Kowloon, Hong Kong and website at www.drk-int.com.

Application of Takeover Code

Although the Company is incorporated in and has its registered office in England, the Board believes that the Company's place of central management and control ("PCCM") is now located outside the United Kingdom, the Channel Islands and the Isle of Man.

Accordingly, the Board believes that the Company is no longer subject to the City Code on Takeovers and Mergers (the "Code") by virtue of its PCCM no longer being in the United Kingdom, the Channel Islands or the Isle of Man and the Takeover Panel has confirmed its view that the Company at present does not fall within the jurisdiction of the Code. However it should be noted that the Code will change, effective from 30 September 2013, such that the PCCM is no longer relevant and from that point the Company will be subject to the Code.

Investors should be aware that at present and until 30 September 2013, whilst the Company is not subject to the Code, shareholders are able to increase their interests in voting rights in the Company to 30% or more without having to make a mandatory offer under Rule 9 of the Code.

-Ends-

This information is provided by RNS

The company news service from the London Stock Exchange

http://www.4-traders.com/VATUKOULA-GOLD-MINES-PLC-4004659/news/Vatukoula-Gold-Mines-Plc-Strategic-Investment-16871673/

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